SocGen launches $4.3bn SIV rescue by Finance News Bulletin

Published: 13/12/07

All occasions are London occasion Search News in the FTcom siteSearchSearch speech marks in the FTcom sitespeech marksCOMPANIES Financial servicesBreadcrumb trail navigation:FT Home > Companies > By sector > Financial servicesServicesSociété Générale has become the latest bank to proclaim a bail out for an off-balance sheet means of transportation, which will see the French store take $43bn worth of assets on to its balance sheet

The move would cut SocGen’s tier one capital relation - a key measure of a bank’s assets strength - by 5 basis points Its tier one relation at the end of September - the last the bank disclosed a shape - was 77 per centSocGen’s move follows alike rescues by HSBC, normal Chartered and Rabobank in the past fortnight of structured investment vehicles (SIVs), which have been hard strike by the ongoing financial liquidity crisis

The bail-out also marks the next occasion in a matter of weeks that a French bank has had to take drastic act with a business unit next the announcement of a plan to recapitalise Natixis’s bond insurance arm last monthSIVs are off financial statement entities that raise money through temporary borrowings and invest this cash in higher-yielding, longer-term possessions The credit squeeze has made it difficult to lift short-term financing and simultaneously hit the value of debt investments, destroying the SIV business replicaSocGen announced on Monday that it would consolidate on its own balance sheet 100 per cent of the possessions of its sole SIV, dubbed Pace, for prime minister Asset Collateralised Entity”, so that it could continue to find financing

SIVs invest in mostly extremely rated financial company debt and in complex praise instruments such as mortgage-backed bonds and collateralised debt obligations It is the fall down in the value of these holdings that has led to doubts of a wave of forced selling as SIVs breach marketplace value triggersSocGen illustrated the impact of such declines when it supposed on Monday that its holdings of the most for children capital comments in its SIV had lost about three-quarters of their valueAt the finish of November it held such notes with a face worth of $103

5m but these had been marked down to $276mSocGen supposed that it still had confidence in the underlying excellence of the SIV’s assets, which totalled $43bn at the end of November

It said that 75 per cent of them were rated AAA by Moody’sAbout one-quarter of its assets were senior debt of US financial companies and about three-quarters were in various kinds of asset-backed bonds – a higher amount than the industry average of about halfShares in SocGen were trading 1 per cent senior at €10778 just before lunch in Paris, outpacing a small increase in the value of the CAC 40 index of most important French shares

French financial institutions had emerged mainly unscathed from the first stage of the credit squeeze that began in the US subprime mortgage marketplace and which hit banks in the US and Germany particularly hard during the summer and near the beginning autumnHowever, this distorted last month when Caisse d’Epargne and Banque Populaire – the two joint banks that own Natixis, the French asset bank – said they would buy and then recapitalise Natixis’s bond insurance arm, CIFG, in order to keep away from a potentially disastrous praise rating downgrade linked to the liquidity crisisCopyright The Financial era Limited 2007Rabobank bails out SIV - Dec-06HSBC in $45bn SIV post security - Nov-26Siv-il engineering - Nov-30On Wall St: Super fund capsule can’t treat the SIV illness - Dec-07StanChart takes on $3bn of SIV - Dec-06Cheyne Finance deal in hesitation - Oct-30More from this sectorMaverick China Payment Profiles: Chinapay, Providing Online sum Solutions for Chinese Banks Maverick China Research12/3/2007$1000Maverick China sum Profiles: 99Bill, Hot Out of the Gates, but Sustainable Maverick China Research12/3/2007$1000BlogsBrussels BlogCharles PretzlikClive CrookDear LucyEconomists’ ForumEnergy FilterJohn GapperGideon RachmanTech BlogThe in secret EconomistWestminster BlogWillem Buiter’s MavereconRegional pagesLatin American agendaChinaIndiaBrusselsInteractivePodcastsDebates & pollsAsk the expertMarkets Q&AJobs and classifiedsBusiness for saleContracts & tendersJobs look for Type your search criteria below:* Minimum delay 15 minutesAll era are London timeFT HomeSite mapContact usHelpAdvertise with the FTMedia centreStudent offersFT ConferencesFT SyndicationCorporate subscriptionsFT GroupPartner sites: Chinese FT

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